GMC Research Aug 2019

EQUITY RESEARCH 20th August 2019
GULF MANGANESE CORP. LTD (ASX: GMC) Speculative BUY

Research Analyst: J-François Bertincourt Share Data
Initiation of Coverage: High Value FeMn Project 52-Week Range $0.004 - $0.024
Opportunity: GMC is capitalising on superior raw material to build the Share Price $0.007
first ferromanganese smelting facility in West Timor. Indonesia is Price Target $0.033
endowed with some of the highest grade manganese ore in the world Corporate Structure
with grades averaging 48% Mn. Shares on Issue 4,937.8m
Infrastructure: The smelting hub facility is next door to four power plants: Options (2¢, 31st Dec 20, 5th Sep 21) 99.0m
two coal-fired power plants (historical 32 MW plant plus recently Options (3¢, 31st Dec 2020) 25.0m
commissioned 30 MW plant), a 120 MW diesel power ship and a new Performance Rights (Directors) 63.0m
40 MW gas-fired power plant in construction. The initial need of the Performance Rights (Employees) 17.5m
smelting hub facility is 17 MW. Power cost has been negotiated at Market Capitalisation $34.6m
8.6 cents/kWh for the next five years. GMC has priority over Kupang City Cash (30th June 2019) $4.0m
for the delivery of energy. GMC’s smelter is 4km from Kupang’s port that Enterprise Value $30.6m
has both bulk and container loading facilities.
Board
Permitting: A Direct Shipping Ore (DSO) licence is in place and historical
Craig Munro Non-Executive Chairman
manganese ore mines are actively progressing through permitting to re-
Hamish Bohannan Managing Director
open and supply ore for export or for GMC’s smelter. We assumed a debt
funding facility of US$40 million with equal repayments over four years Andrew Wilson Non-Executive Director
and an 18% p.a. interest rate. Tan Hwa Poh Non-Executive Director
Ian Gregory Company Secretary
Funding: GMC is negotiating with several potential off-takers and debt
providers to secure the additional capital to fully fund the completion of 120 $0.03
the Kupang Smelting Hub Facility.
Trading Volume (millions)
News Flow: News flow is accelerating since GMC received its DSO licence. Share Price
High grade manganese ore mines are progressing rapidly towards re-start.
Positive news on debt funding should act as a strong share price catalyst.
80 $0.02
Fast Track to Production: Once funding is in place, the time to completion
is estimated at 8 months. Refurbished furnaces are already on site as well
as most of the key components such as electrical and hydraulic
equipment. Producing premium low carbon ferromanganese alloy (85%+
Mn, less than 0.5% C). 40 $0.01
Key Assumptions include LC FeMn price flat at US$1,900/t, 49%

manganese ore at US$250/t, two additional furnaces from FY2023 for a
total of 4 or 32 MVA, then two more (fully funded by cash flow) for a total
of 8 or 50 MVA from FY2028. Our financial model considers only the first 0 $0.00
20 years of the project to FY2039.
Feb-18
Feb-19
Aug-17
Aug-18
Nov-17
May-18
Nov-18
May-19
Valuation: Considering the significant added value generated by the

smelter and robustness of the project, we consider that GMC should
Gulf Manganese Corp. Ltd is an Australian
reach a market value in the order of A$168m million within the next
registered company listed on the Australian
eighteen months or $0.033 per share. Securities Exchange (ASX: GMC) with its head
Upside: Beyond the leverage on FeMn alloy prices, further valuation office in Perth, Western Australia. The
upside can come from increased market recognition of product quality in company, through its 74.9% owned subsidiary
terms of pricing, additional furnaces beyond the six considered, securing PT Gulf Mangan Grup, is building the first ferro
high-grade manganese mineral resources. manganese (FeMn) smelting hub in West
Timor, Indonesia.
STOCKBROKERS I INVESTMENTS I CONSULTING Triple C Consulting Pty Ltd ABN 45 141 412 106 AFSL 346282
5 Lindsay Street Perth WA 6000 | PO Box 8539 Perth BC WA 6849 P +618 9228 5999 F +618 9228 5955 E admin@tripleccc.com.au W www.tripleccc.com.au
Gulf Manganese Corporation Ltd (ASX:GMC)
Project Fast Tracking towards High Value FeMn Production
TABLE OF CONTENTS
1. GMC Valuation ...................................................................................................... 3
Asset Summary .................................................................................................3
Project Financing...............................................................................................3
Capital Structure ...............................................................................................3
Valuation ...........................................................................................................4
2. GMC Corporate Overview ...................................................................................... 5
Strategy .............................................................................................................5
Share Register ...................................................................................................6
Organisational Chart .........................................................................................7
3. Indonesia Country Overview.................................................................................. 7
Economy and Sovereign Rating.........................................................................7
Mining Law ........................................................................................................7
4. Manganese Market ............................................................................................... 8
Manganese in Steel Production ........................................................................8
Manganese Alloys .............................................................................................9
Batteries ..........................................................................................................10
Other Manganese Uses ...................................................................................10
Manganese Ore ...............................................................................................10
Manganese in Indonesia .................................................................................11
Pricing .............................................................................................................12
Historical Prices and Forecast .........................................................................13
Price Scenarios ................................................................................................13
5. Manganese Ore ................................................................................................... 14
Mineral Resources Endowment ......................................................................14
Production History ..........................................................................................14
Manganese Ore Sources .................................................................................15
PIJ - Putra Indonesia Jaya Mine.......................................................................16
Mining Operations ..........................................................................................17
New NTT Governor .........................................................................................17
Exploration and Diversification .......................................................................18
DSO operations ...............................................................................................18
6. Kupang Smelting Hub Facility............................................................................... 19
Location and infrastructure ............................................................................19
Development Timeline ....................................................................................21
Land Lease.......................................................................................................21
Power Supply ..................................................................................................21
Environmental and Building Approvals ...........................................................22
Permitting .......................................................................................................22
Kupang Smelter Raw Materials .......................................................................22
Construction....................................................................................................22
Processing .......................................................................................................23
Capital Costs....................................................................................................25
Operating Costs...............................................................................................26
Commissioning ................................................................................................26
Production ......................................................................................................26
Port Access ......................................................................................................26
Financial Assumptions ....................................................................................26
Financial Modelling .........................................................................................27
7. Directors & Management Team ........................................................................... 27
Craig Munro, Non-Executive Chairman...........................................................27
Hamish Bohannan, Managing Director & CEO ................................................27
Andrew Wilson, Non-Executive Director ........................................................28
Tan Hwa Poh, Non-Executive Director ............................................................28
Robert Ierace, CFO ..........................................................................................28
Ian Gregory, Company Secretary ....................................................................28
Peter Allen, General Manager Marketing .......................................................29
Steven Pragnell, President Director / Commissioning Director ......................29
8. Investment Risks ................................................................................................. 30
Page 2
1. GMC Valuation
Asset Summary
Gulf’s key asset is the Kupang Smelting Hub facility currently in construction.
Kupang will contain multiple furnaces built in stages over about five years,
GMC is taking the opportunity targeting the production of a premium quality manganese alloy (low carbon
to build a ferro manganese ferromanganese). At full production, Gulf will aim to purchase and process over
smelter to unlock and add
considerable value to the high 525,000 tonnes of manganese ore per annum, producing over 200,000 tonnes
grade manganese mineral of premium quality manganese alloy.
resources of Indonesia, subject
to an export ban. For Stage 1 (first two furnaces), GMC will process some 110,000 tonnes of
manganese ore per annum, to produce about 43,000 tonnes of premium quality
85%+ ferromanganese alloy.
GMC holds a 74.9% interest in Indonesian subsidiary PT Gulf Mangan Grup. PT

Jayatama Tekno Sejatera (PT JTS) holds the remaining 25.1%.
Project Financing
GMC completed a share placement in May 2019 raising $3.6 million to advance
preparations for Direct Shipping Ore (DSO) operations and to provide additional
working capital whilst debt funding and off-take negotiations are finalised.
The cost to complete the smelting facility with the first two furnaces is estimated
at US$13 million, which includes first fill for commissioning. The capital cost for
an additional two smelter units is estimated US$20 million. We assumed that
US$35 million is raised through debt funding.
GMC cash balance was at $3.983 million as at 30 June 2019.
Capital Structure
GMC capital structure includes some options (total about 2.5% of the current
capital structure) which are due to expire on 31 December 2020 and 5
September 2021. The exercise price of those options is $0.02 and $0.03,
respectively. The options expiring 31 Dec 2020 have been assumed to be
exercised and included in our valuation.
GMC capital structure also includes some performance rights (total about 1.6%
of the current capital structure). The performance rights up to 20 December
2020 have been considered and included in our valuation.
GMC Capital Structure
Securities Number Price Expiry Notes

Shares (30 Jul 2019) 4,937,746,998 $0.007
Unlisted Options 25,000,000 $0.020 31-Dec-20 Assumed to be exercised
Unlisted Options 25,000,000 $0.030 31-Dec-20 Assumed to be exercised
Unlisted Options 50,000,000 $0.020 5-Sep-21 Not considered
Unlisted Options 24,000,000 $0.020 5-Sep-21 Not considered
Directors Performance Rights 18,000,000 Expiring 28-Nov-19 Included
Employees Performance Rights 16,000,000 Expiring 28-Nov-19 Included
Directors Performance Rights 31,500,001 Vesting 20-Dec-20 Included
Directors Performance Rights 6,725,083 Vesting 5-Mar-21 Excluded
Employees Performance Rights 1,500,000 Vesting 5-Mar-21 Excluded
Directors Performance Rights 6,725,083 Vesting 5-Mar-22 Excluded
Total used for valuation 5,053,256,999
Page 3
Source: GMC Appendix 3B 30 July 2019
Valuation
As part of a sum of the parts valuation, we first valued the Kupang Smelter (and
DSO operations) project under different price scenarios.
The Base Case generates a healthy NPV and rate of return.
The smelter valuation sensitivity to operating costs and ferromanganese prices

is summarised in the table below.
Kupang Smelter valuation, post-tax un-risked NPV sensitivity, A$, 74.9% basis
Change in Operating Costs
NPV
-20% -15% -10% -5% 0% 5% 10% 15% 20%
-20%
$1,520 263 211 159 105 51 (3) (62) (130) (199)
-15%
$1,615 330 279 227 175 121 67 13 (42) (109)
FeMn Price US$/t
-10%
$1,710 398 346 295 243 191 138 83 29 (25)
-5%
$1,805 465 413 362 310 259 206 154 99 45
$1,900 532 481 429 378 326 275 222 169 116
+5% $1,995 600 548 496 445 393 342 290 238 185
+10% $2,090 667 615 564 512 461 409 358 306 254
+15% $2,185 734 683 631 580 528 477 425 373 322
+20% $2,280 801 750 698 647 595 544 492 441 389
Source: Terra Studio analysis
Thanks to the value add of the smelting process and the low operating and
capital costs, the Kupang Smelter presents a viable, robust project, with the NPV
being a multiple of the up-front capex in all but the worst cases. This is
comforted by the range of excellent Internal Rate of Return obtained in most
scenarios as indicated in the table below.
Kupang Smelter post-tax IRR sensitivity, A$, 74.9% basis

Change in Operating Costs
IRR
-20% -15% -10% -5% 0% 5% 10% 15% 20%
-20%
$1,520 460% 238% 129% 68% 32% 6% n/a n/a n/a
-15%
$1,615 823% 407% 225% 129% 72% 37% 13% n/a n/a
FeMn Price US$/t
-10%
$1,710 1520% 685% 368% 215% 129% 75% 41% 19% -3%
-5%
$1,805 3269% 1165% 591% 338% 207% 128% 78% 45% 23%
$1,900 n/a 2120% 949% 523% 315% 200% 128% 81% 49%
+5% $1,995 n/a! 4835% 1573% 804% 472% 296% 194% 128% 83%
+10% $2,090 n/a! n/a 2890% 1255% 701% 432% 281% 189% 128%
+15% $2,185 n/a n/a 7379% 2065% 1047% 624% 400% 268% 185%
+20% $2,280 n/a n/a n/a 3914% 1611% 902% 564% 373% 257%
Source: Terra Studio analysis, some of the extreme IRR values have been omitted.
Further sensitivity analysis is summarised in the Figure 1.1.
The strongest sensitivity relates to ferromanganese prices as expected.
Page 4
Figure 1.1 – Kupang Smelter, post-tax un-risked NPV sensitivity

$600
$500
GMC valuation is most sensitive $400

to FeMn prices as expected.
NPV (A$m)
$300
$200
FeMn Price
$100 Mn Ore Price
Opex
$0
-25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25%
Variation from Base Case

Subject to successful construction and commissioning of the smelter in parallel

to some manganese ore exports, GMC should reach a market capitalisation in
the order of $168 million or a share price of $0.033 within 12 to 18 month time.
GMC Valuation (12 to 18 month horizon)

Risk
Asset Value Range Preferred Interest Per share
Factor
Kupang Smelter $121-$528m $326m 90% 74.9% $0.044
Exercise of Options $1.3m $0.000
Cash $3.0m $0.001
Debt US$35m ($51.5m) ($0.010)
Corporate costs ($4.3m) ($0.000)
Total $168m * $0.033
Source: Terra Studio. * market capitalisation
2. GMC Corporate Overview

Strategy
Gulf’s strategy is to produce the highest purity, low carbon and medium carbon
ferromanganese alloys to fulfil international demand from high grade and
specialty steel producers.
Gulf is focused on developing a ferromanganese smelting business in West

Timor, Indonesia, with its business partner PT JTS, to produce and sell low
carbon ferromanganese alloy. Gulf will own 74.9% of PT Gulf Mangan Grup (PT
The Kupang Smelter with four
furnaces or 32 MVA Smelter at
GMG) with PT JTS owning 25.1% of PT GMG. The Kupang Smelting Hub facility
full capacity will produce will contain at least six furnaces built in stages over ten years, targeting the
95,000 tonnes of premium production of premium quality manganese alloys.
quality FeMn alloy.
With four furnaces or 32 MVA, the Kupang Smelter should process 247,000
tonnes of manganese ore per annum to produce 95,000 tonnes of premium
quality ferromanganese alloy.
Page 5
The higher manganese content and lower impurity content of low carbon and
medium carbon ferromanganese products achieves premium pricing compared
to standard high carbon ferromanganese alloys.
Whilst Indonesia is home to many high-grade manganese deposits the

legislation does not allow for the export of untreated ore. As a result, following
the implementation of that law in 2012, mining of the manganese ores in
Indonesia largely stopped in 2013. The establishment of Gulf’s Smelting Hub in
Kupang will allow many of these mines to start production again.
Gulf has also progressed with permitting to allow sale and shipment of
manganese concentrates (>49% Mn) under the Indonesian provision for
smelting and processing companies to sell concentrate during construction to
Indonesia manganese ore
stands out with the highest assist with cash flow. A Direct Shipping Ore (DSO) licence is now in place.
grade of manganese combined
with very low iron and Indonesia manganese ore is one of the highest grade manganese ores available,
phosphorous. with a unique combination of very high manganese content, above 49%,
combined with low iron and phosphorous. These qualities are in high demand
from manganese alloy producers worldwide particularly in China, Korea and
India. For the LC ferromanganese alloys, the key markets are mainly Europe and
North America, followed the Middle East and South East Asia.
Gulf production facilities in Kupang are ideally located to supply these key
markets with access to international container lines and bulk cargo trade routes
on its door step.
Share Register
GMC shares are also tightly held, with the top 20 shareholders representing 48%
of the share register. When combined with the Board and management, the
total represents in excess of 50% of the share register.
GMC Share Register

Entity Shares % Interest
Citicorp Nominees Pty Ltd 465.4m 9.43
HSBC Custody Nominees (Australia) Ltd 374.6m 7.59
Top 20 shareholders + Board PT Jayatama Global Investindo 181.4m 3.67
and management represent in Tan Hwa Poh * 152.1m 3.08
BNP Paribas Noms Pty Ltd 149.9m 3.04
excess of 50% of GMC share
Eighteen Blue Investments Pty Ltd 133.3m 2.70
register ABN Amro Clearing Sydney Nominees Pty Ltd 126.2m 2.56
Tom Hale Pty Ltd 98.5m 1.99
Ali Santoso Halim 83.3m 1.69
Sam Boon Beng Lee & Jenny Su Lee Lee 69.9m 1.42
John Albert Woodacre 66.3m 1.34
Acuity Capital Investment Management Pty Ltd 65.0m 1.32
Hamish Bohannan * 63.0m 1.28
Peter Sheppeard & Associates 62.3m 1.26
Kim Yew Lee 60.4m 1.22
Neil Thompson 60.0m 1.22
Zhang & Khoe Family Pty Ltd 59.9m 1.21
LSG Resources Pty Ltd 48.0m 0.97
Eduardo Siao & Evelyn Siao 45.5m 0.92
Arkwright Development Pty Ltd 42.5m 0.86
Top 20 shareholders 2,407.5m 48.8%
Board and Management (including T.H. Poh & H. Bohannan*) 276.6m 5.6%
Total 2,497.8m 50.6%
Total 4,937.8 100.0%
Source: GMC as at 14 August 2019
Page 6
Organisational Chart
Gulf Manganese Corporation Limited organisation chart is summarised in Figure
2.1.
Figure 2.1 – Gulf Organisational Chart
Source: GMC
As operations at the Kupang Smelting Hub Facility and associated mines

develop, management of the company should progressively move to Kupang.
3. Indonesia Country Overview

Economy and Sovereign Rating
Indonesia has the largest economy in Southeast Asia and is a member of G20.
Indonesia is rated investment grade by the three rating agencies: Fitch, Moody’s
and S&P; with a stable outlook. Overall the ratings provided by those agencies
are equal or better than the ratings provided to Italy or Portugal.
Indonesia is rated investment
grade by the three credit Sovereign Credit Rating: Indonesia, Italy & Portugal
agencies Agency Country Rating Outlook Date
Ratings are equal or better than Indonesia BBB Stable 14 Mar 2019
Fitch Italy BBB - 22 Feb 2022
Italy or Portugal
Portugal BBB - 24 Mat 2019
Indonesia Baa2 Stable 13 Apr 2018
Moody’s Italy Baa3 Stable 19 Oct 2018
Portugal Baa3 Stable 12 Oct 2018
Indonesia BBB Stable 31 May 2019
S&P Italy BBB Negative 26 Oct 2018
Portugal BBB Stable 15 Mar 2019
Source: Trading Economics.
Mining Law
Indonesia continues to be a significant player in the global mining industry, with
significant production of coal, copper, gold, tin, bauxite, and nickel. Indonesia
also continues to be one of the world’s largest exporters of thermal coal.
Page 7
Under the 2009 Mining Law with a new area-based licensing system that is
applicable to both foreign and domestic investors and incorporates tendering
procedures for granting licences, with the involvement of local and provincial
governments, as well as the central government.
Since the ban on the export of unprocessed (or insufficiently processed) mineral
ores came into force on 12 January 2014, the Government has issued various
implementing regulations to allow mining companies to continue exporting
certain types of concentrates, provided that those mining companies have
committed to building or supporting the development of processing/refining
facilities in Indonesia.
The DSO Licence obtained by GMC is within this regulatory framework.
Based on the Mining Law, there are several terms that are used to describe
mining areas, as follows:
• Mining Area (referred to in Bahasa Indonesia as Wilayah Pertambangan – “WP”)

means a potential area for minerals and/or coal that is not bound by governmental
administrative boundaries as part of the national spatial planning;
• Mining Business Area (Wilayah Usaha Pertambangan – “WUP”) means a part of a
mining area that has already been completed with data, geology potential, and/or
information about geology;
• Mining Business Licences (Izin Usaha Pertambangan, or “IUP”) are general licences
to conduct mining business activities in a WUP area.
• Work Plan and Budget (Rencana Kerja dan Anggaran Biaya or “RKAB”) needs to be
prepared and submitted annually to the Minister of Energy and Mineral Resources or
the Governor. The RKAB needs to be approved to perform any construction, mining,
processing and/or refining activities, as well as any transportation and sales activities.
4. Manganese Market
Manganese in Steel Production
Manganese is the fourth most used metal on earth in terms of tonnage, behind
iron, aluminium and copper. It has numerous applications, including objects
made of steel, portable batteries, or aluminium beverage cans. In each case
90% of all manganese manganese plays a vital role in improving the properties of the alloys and
consumed is used in the
production of steel compounds involved in each specific application.
Major producers of manganese ore include South Africa, Australia, Gabon,

China, Brazil and Ghana. Manganese content typically ranges from 35% to 54%
for manganese ore and from 74% to 95% for ferromanganese.
About 90% of all manganese consumed is used in the production of steel,

primarily for its properties as a deoxidizing and an alloying element.
World crude steel production in 2018 was 1.809 billion tonnes, up by 4.6%
compared to 2017. Crude steel production increased in all regions in 2018
except in the EU, which saw a 0.3% contraction. China increased its dominant
position from 50.3% of global crude steel production in 2017 to 51.3% in 2018.
Steels usually contain from 0.2% to 2% manganese in the form of manganese

alloy depending on the grade of steel being produced as manganese is the
cheapest alloying element that improves the tensile strength, workability,
toughness, hardness and resistance to abrasion. No satisfactory substitute for
Page 8
manganese in steel has been identified which combines its low cost with
outstanding technical benefits.
Stainless steels which represent less than 2% of total world steel production
uses chrome and nickel but also contains about 1% manganese. There are also
manganese-stainless steels, where nickel is replaced partly or entirely by
manganese, giving a manganese content of 4 to 16%, however these are not
produced in large quantities, these are known as 200 Series stainless.
Manganese Alloys
There are two families of manganese alloys called ferromanganese and silico-
manganese. Silico-manganese is approximately 60% of overall manganese alloy
production and ferromanganese the remaining 40%.
Manganese alloys are classified Ferromanganese, which contains 74-95% manganese, and can be classified into
and prices according to their three main sub groups; High Carbon (>2% carbon), Medium Carbon (1.0-2.0%
Mn content as well as C content
carbon) and Low Carbon (<1% carbon).
Medium and low carbon ferromanganese are commonly referred together as

“Refined Alloys”.
Figure 4.1 – Manganese Value Chain
Miners Manganese Ore
88.0%
12.0% Electrolytic Manganese
Slag 15.0% Manganese Alloy
Metal (EMM)
Slag 85.0%
Intermediate
27.0% 49.5% 13.5% 10.0% 83.0% 17.0%
High Carbon Silicomanganese Medium and Low Carbon Other EMM EMD/
Other
Ferromanganese Ferromanganese Other
Mostly Flat Steel Mostly Long Steel Speciality Steel Stainless Chemicals/
Steel Batteries
End
Users Household
Household Durables,
Durables, Construction and Stainless Steel, High 200 Series Fertilizers,
Heavy Machinery
Heavy Machinery Infrastructure Strength Low Alloy Steel Stainless Ceramics, Glass
Source: GMC
In 2018, IMnI indicates the following market components of the manganese

alloys in terms of volume and uses:
• Silico-manganese (SiMn) 15.959 million tonnes produced, used mainly in lower-grade

long steel products, such as rebar for the construction sector in emerging economies
• High carbon ferromanganese (HC FeMn) 4.05 million tonnes, used mainly in flat steel
products destined for manufacturing automotive and consumer white goods in
developed and emerging economies.
• Refined ferromanganese (Ref FeMn) 1.632 million tonnes, used mainly in higher-
grade steels where impurities need to be closely controlled by advanced steelmakers.
Page 9
Figure 4.2 –Manganese Alloys Market in 2018
SiMn
HC 74%
FeMn
19%
Ref
FeMn
7%
The GMC initial production of
Ref FeMn is modest and will not
trouble the market Source: IMnI
Within the Ref FeMn market, GMC production will initially (2 furnaces for 14
MVA) represent 2.6% of the 2018 market.
Batteries
After steels, the second most important market for manganese (in dioxide form)
is for batteries. Manganese dioxide is used as a depolarizer in dry-cell batteries
fabrication. Worldwide dry cell consumption exceeds 20 billion units per year.
The role of the Mn dioxide is to oxidize the hydrogen and form water. The
development of clean energy applications and use in batteries for electric
vehicles are seen as significant drivers for future manganese consumption.
Manganese could potentially replace the traditional cobalt and nickel as the
cathode in a lithium-ion battery:
• Manganese is cheaper and more abundant than both cobalt and nickel;
• Manganese mining is not tainted with ethical issues associated with cobalt mining;
• Research has shown that a manganese-based cathode could potentially store more
energy than cobalt or nickel.
For example, BASF has stated that starting in 2021, BASF-designed cathodes will
be comprised of 70% manganese and whose end goal is to use 5% or less of
cobalt.
Other Manganese Uses

Other uses include manganese sulphates as an agricultural fertilizer, in water
purification, health vitamins, gasoline additives and colouring glass.
Manganese Ore
The world’s output of manganese ore increased in 2018 for the second
consecutive year, on rising demand from manganese alloy smelters. It reached
20.3 million dry mt (Mn contained), up by 6% or 1.2 million dry mt from 2017,
exceeding 2014 production of 19.3 million mt and marking a new record high.
The additional supply mostly came from Africa and Australia, driven by China,
where output decreased because of mine depletion and stricter safety
regulations.
Page 10
Figure 4.3 – Global Manganese Ore Production
20
15
10
0
2012 2013 2014 2015 2016 2017 2018
Low grade (<30%Mn) Mid grade (30% to 44%Mn) High grade (>44% Mn)
Source: IMnI
We note that the production of medium and high grade manganese ores have
been increasing in line with stronger demand for quality ores.
Manganese in Indonesia
Indonesia is home to many substantial high-grade manganese deposits, and
legislation does not allow for the export of ‘untreated’ ore.
As a result of this legislation being implemented in 2012, mining of manganese

Indonesia manganese ore has deposits in Indonesia largely ceased in 2013.
unique characteristics.
Indonesia manganese ore is one of the highest grade’s manganese ores
available, with a unique combination of very high manganese content, above
49%, combined with low iron and phosphorous (see Table below). These
qualities are in high demand from manganese alloy producer worldwide
particularly in China, Korea and India.
Manganese Ore Typical Specifications

Eramet - Eramet- MB 44 RSA Semi- Ghana
Compound GMC Brazil South 32
MA MMD index Carbonate Carbonate
Mn 50.0% 50.0% 44.5% 44.3% 44.0% 45.5% 36.5% 27.5%
Fe 1% 3.5% 5% 4.4% 5% 6% 5% 1.5%
Fe: Mn ratio 50:1 14:1 9:1 10:1 9:1 8:1 7.3:1 18:1
SiO2 6% 4% 8% 4.7% 11% 11% 6% 14%
Al2O3 2% 6% 8% 8% 5% 6% 0.3% 2.2%
P 0.08% 0.12% 0.11% 0.11% 0.10% 0.10% 0.03% 0.06%
Source: Company announcements, GMC.
Page 11
Figure 4.4 –Manganese Ore Competitor Analysis
50
Indonesia
Better Quality
40
a lu e
gV
a sin 30
In c re Nsuta, Ghana
Mn : Fe Ratio
Groote, AU
Lower Quality
20
Groote, AU Woodie Woodie, AU
Azul, Brazil Kalahari, RSA
Woodie Woodie, AU
10
Kudamane, RSA
Hotazel. RSA
Moanda, Gabon
Tshipi Borwa, RSA
Nchwaning. RSA
0
16 14 12 10 8 6 4 2 0
Total Impurities of Fe, Al2O3 and P (%)
Lower Quality Better Quality
Source: Company ore specifications. Some may be out of date. AU = Australia, RSA, South Africa
It is Gulf’s intention to enable many of Indonesia’s high-grade manganese mines

to re-start production through the development of the Kupang Smelting Hub
Facility, which once in production will produce high purity, low and medium
carbon ferromanganese alloys to fulfil international demand from high grade
and specialty steel producers.
Pricing
Manganese ore pricing is principally based on manganese content of the ores
with premiums / penalties applied for impurity levels and form of shipment. Ore
exported by Gulf will be of significantly higher grade (over 49%) than the quoted
grade (44%) and should therefore expect a premium over the quoted price. No
premium has been assumed in our financial model.
Fast Markets / Metal Bulletin
There are two main manganese ore price indexes created by Metal Bulletin:
• 44% Mn ore (CIF Tianjin) representing oxide ores mined in countries such as Australia,
Brazil and Gabon and
• 37% Mn ore (FOB Port Elizabeth) representing semi carbonate ore mined in South
Africa.
Metal Bulletin index for shipments to China for 44% Mn lump ore was
USD$5.91/dmtu CIF, Tianjin on 12 July 2019 and 37% Mn ore is US$5.39/dmtu
FOB port Elizabeth (2 August 2019).
Page 12
For example a manganese ore containing 49% Mn will be priced at:
!"$5.91 ) 49% = !"$290/012
Note this is a conservative price, as the higher the manganese content (and
Mn/Fe ratio and lower the impurities), the higher the index price should be.
GMC is aiming at progressively getting market recognition for its higher value
product.
Jupiter Mines Limited
As an example, this company publishes the price achieved for its ore sales on a
quarterly basis. Based on its latest quarterly report (ended 31 May 2019)1, the
average price received during the quarter for the sale of 837,531 tonnes of high-
grade lumpy ore was $6.01/dmtu. This compared with $7.19/dmtu a year earlier
and an average of $6.41/dmtu for the 2018-19 financial year.
Historical Prices and Forecast

Figure 4.5 displays historical prices for manganese ore as well as some
ferromanganese alloys.
Figure 4.5 – Manganese Value Chain
$2,500
$2,000
Prices (US$/tonne)
$1,500
LC FeMn EXW USA

MC FeMn EXW USA
$1,000 LC FeMn (GMC)
HC FeMn 75 EXW USA
Mn Ore 49
Mn Ore 49 ( GMC)
Mn Ore 44
$500
Mn Ore 36
$0
Jul 14 Jul 15 Jul 16 Jul 17 Jul 18 Jul 19 Jul 20 Jul 21 Jul 22
Source: CRU, Metal Bulletin, Terra Studio
Price Scenarios
For low carbon ferromanganese, the base case price assumption of US$1,900/t
is conservative as it is lower than the recent and forecasted (CRU) prices for
medium carbon ferromanganese.
For high-grade manganese ore (49% Mn) to be exported by GMC, the base case
price assumption of US$250/t is conservative as it is lower than the recent and
forecasted (CRU) prices for 44% Mn manganese ore.
1 Jupiter has a 49.9% beneficial interest in Tshipi é Ntle Manganese Mining Proprietary Limited, which operates the Tshipi Borwa Manganese Mine in the southern portion of the Kalahari
manganese field.
Page 13
Our analysis includes both positive and negative price scenarios around those
assumptions. For example for ferromanganese, a -20% scenario represents a
price of US$1520/t, which is the low point touched for less than a year (in 2015-
2016) by the LC FeMn price above.
5. Manganese Ore
Mineral Resources Endowment
Manganese deposits are most prolific in eastern Indonesia and typically are
associated with
1. Mn nodules in deep-sea (pelagic) sediments,

2. Stratabound ore deposits in mostly red calcareous shales within limestone-
dolomite masses; and
3. Hydrothermal replacement of limestone in Volcanic Massive Sulphide (VMS)
systems.
Exploration for Mn mineralisation within the Indonesian Archipelago is

extensive. Currently, there are 277 exploration concessions (527,180 ha) and
172 mine/production concessions (145,504 ha). The majority of Mn concessions
are located on the island of Timor. As of 1 February 2015, there are 171
exploration and 49 mining/production IUPs on West Timor respectively (IUP =
Izin Usaha Pertambangan or permit to conduct a mining business).
Despite these numbers, only one deposit on the island of Romang (previously
held by Robust Resources Limited) has a mineral resource reported in
accordance with JORC Code (2012) guidelines.
In 2015. SRK estimated the total tonnage of prospective Mn stratigraphy

(covered by IUPs) on West Timor as follows:
Total Tonnage of Prospective Mn Stratigraphy, West Timor
Parameter Mine/Production Exploration Total

Total Area of IUP 374 million m2 1,149 million m2 1,514 million m2
No. of IUP intersecting Formation 47 135 182
Average Area of IUP 7.96 million m2 8,.44 million m2 8.32 million m2
Average Strike Length 2,116 m 2,179 m 2,163 m
Total Prospective Strike Length 99,000 m 294,000 m 394,000 m
Prospectivity of IUP 8,910,000 m3 26,460,000 m3 35,460,000 m3
Total Ore Tonnage 29 Mt 85 Mt 114 Mt
Source: GMC. Thereafter annually.
Notes: The following parameters and assumptions for the estimation are used:
• Mn ore zone thickness of 3 m (e.g. based on field observations around Kefa);
• Productive strike length of the IUPs calculated as 75% of the average length of the IUP;
• Mine depth of 30 m;
• Bulk density of 3.2; and
• Relatively flat-lying stratigraphy
An assumed 8.1 Mt of ore feed required over a 30 years life represents only 7%
of the total ore tonnage estimated by SRK.
Production History
There is a significant history of manganese ore production in Timor, which was
focused on the concentrate export market. However, the legislative change in
2012/2013 prohibited more of the mining operations from continuing.
Page 14
The production reached about 250,000 tpa on average over 2008-10. This
production is well in excess of Gulf’s initial requirement and well below the
global resource estimated by SRK.
Historical mining practices used minimal earthmoving equipment and

handpicking of the coarse ore (nodules and fragments > 30mm), which meets
the current market demand, but leave behind the fine ore. Many previous
operations have significant stockpiles of fines, estimated at 500,000 t.
Gulf will be able to optimise the manganese resources as the smelting process
can use both coarse and fine ores. Gulf is working with a number of parties to
develop the optimum technology for extracting the fine ore from the claystone
matrix. The potential is substantial as fine ore represents 2/3 of the total ore
within each ore zone on average. With a significant density difference between
the ore and the claystone matrix (4.0 vs 2.8 on average) the separation process
is expected to be fairly simple and low-cost to develop and operate.
Manganese Ore Sources

Despite the lack of verifiable Mn resources and data in the public domain, West
Timor is considered well-endowed for Mn based on geology, Mn occurrences
and informal mining activities.
GMC’s strategy is to secure ore supply for both the required smelter feed and
well as direct export of concentrate from a variety of sources, namely:
• Gulf owned IUP, managed and operated by GMC subsidiary,

• Locally owned IUP’s, where ore would be acquired through purchasing contracts,
• Locally owned IUP’s, where Gulf would enter a JV with the owner and manage the
mining operation, and
• Other manganese ore sources outside of West Timor, namely other islands in NTT, as
well as Timor-Leste.
This strategy will allow for better control of price, as well as variety in grade of
both manganese and other elements, for the purpose of blending for smelter
feed.
Gulf’s manganese ore
requirements are well within
Gulf now has in place Memorandum of Understandings (MoU) with some 19
the production capacity of the
region. local manganese mining companies for the supply of about 10,000 tonnes per
month of manganese ore to the Kupang facility. These initial agreements will
supply Gulf with the required feedstock to commence commercial production.
Gulf’s ability to negotiate and secure these agreements is a strong testament to
the standing and rapport that the in- country team has within the NTT
community.
Manganese Ore Feed Requirements

Tonnes 2020 2021 2022 2023 2024
Ore Feed 25,000 100,000 180,000 260,000 290,000*
Source: GMC. Thereafter annually.
GMC requires an ore-feed with emphasis on the ratios of certain chemical

elements, in particular, Mn/ Phosphorus and Mn/ Iron. Therefore, low- to high-
grade Mn deposits are suitable as ore sources, as beneficiation and blending can
be used to obtain the Mn feed specifications for the smelter.
Page 15
Following the DSO licence approval (for the export of 103,162 tonnes of high-
grade manganese ore per year) received by GMC on 20th May 2019, several of
the possible manganese ore sources in the Nusa Tenggara Timur Province (NTT)
have quickly submitted their RKAB (annual work plan and budget applications).
These RKABs have been recommended for approval by the ESDM (Ministry of
Energy and Mineral Resources). As at 4th July 2019, 13 RKABs had been approved
and nine were in progress. Approved applications are waiting for final Provincial
Government approval.
These mines were forced to close down under Indonesian government’s

beneficiation policy in 2013, which banned the export of untreated ores. Gulf
expects to see productivity from these mines to build incrementally over the
coming months as production is gradually ramped-up, along with the utilisation
of key logistical and warehousing infrastructure.
PIJ - Putra Indonesia Jaya Mine

On 4th July 2019, GMC announced it had successfully vended the Putra Indonesia
Jaya “PIJ” high-grade manganese mine in Timor to its key Indonesian and
Singaporean partners. 100% of the ore produced will be supplied to Gulf’s
operations in Kupang. It is expected that ore supply from PIJ will commence in
September 2019 and will steadily increase to about 2,000 tonnes per month by
Q1 2020.
This transaction conforms to Gulf’s strategy to focus on smelting development

and operations rather than mining.
Note as Gulf (through its local subsidiary) hold the permit to export, all the ore
has to be sold to Gulf for either export or feed to the Kupang smelting facility.
In the case of PIJ, transferring the ownership and mining operations to a local
entity makes perfect sense. PIJ is located very close to a village. It has been
mined previously through artisanal methods, whereby a few hundred
inhabitants collect manganese nodules with hand tools. While this is labour
intensive, it has the benefit to minimise earth movements, undertake ore
sorting at the “mine face” and spread financial benefits through the local
community.
Figure 5.1 – One of PIJ Deposits, previously mined
Source: GMC. Staff members provide a relative scale. The distance between the test pit and the outcrop is
estimated at 250m.
Page 16
The PIJ mine was visited as part of our journey to West Timor. Signs of previous
mining activity had basically disappeared thanks to vegetation regrowth.
Current evaluation activities consist of pitting and trenching along strike and
across strike. Compared to drilling, those methods do not require road access
nor water. Furthermore, the manganese mineralisation in the form of layers of
nodules strongly folded and faulted, are highly problematic to drill and the lack
of representativity of drill samples obtained (nugget effect) has led largely to
poor results in the past. A back of the envelope estimate from the Chief
Geologist indicates 400,000 t.
Figure 5.2 – Manganese Nodules Samples and XRF Reading (Mn 58%)
Source: Terra Studio.
Mining Operations
Gulf has signed a MoU with PT Bruder, a local mining contractor, to provide
contract mining services for the first year, and potentially in the future. At this
point, Gulf is open to both the possibility of long-term mining contracts, or
leasing/purchasing its own mining fleet aiming at keeping down capital costs
and proving operational flexibility prior to making any longer-term
commitments.
Gulf is planning a ramp-up of mining and ore purchasing operations,

commencing in the second half of 2019. Initial focus will be on ore purchasing,
with PIJ coming online by the end of September 2019, followed by others in late
2019/early 2020.
New NTT Governor

In 2018, a new Governor was elected to lead NTT. During an interview, he made
a claim to stop mining activities in NTT, causing uncertainty and loss of
confidence in the Gulf project overall. The official decree issued some months
later was actually targeting illegal mining. All existing IUP needed to have their
documentation verified by the ESDM / Governor evaluation committee to be
able to recommence operations if it was in order.
Page 17
Exploration and Diversification

Figure 5.3 – Satellite Map showing Timor-Leste and the East Nusa Tenggara Province
Source: Terra Studio
To further de-risk the ore supply, GMC is investigating some supply alternatives
outside the NTT Province, such as Timor-Leste. On 2nd Aug 2019, CMC
announced it had entered into an agreement to acquire a strategic 20% interest
in Iron Fortune Pty Ltd (“Iron Fortune”), a private Australian-based minerals and
exploration company focused on Timor-Leste. This acquisition is an excellent
opportunity to diversify its asset base beyond the NTT Province and Indonesia
while remaining in the same geological region, where similar high grade
manganese is likely to be sourced. According to the terms of the agreement
GMC can earn up to 100% of Iron Fortune in line with various milestones. Timor-
Leste is progressing its Mining Act, which is a condition precedent to get
Exploration Leases granted. In the meantime, field reconnaissance has identified
on surface high grade manganese mineralisation with similar characteristics to
mineralisation found across the border.
DSO operations
On 15th May 2019, GMC received its final ratification and formal receipt of its
Direct Shipping Ore (DSO) licence from the Ministry of Trade.
The licence will allow GMG to export up to 103,162 tonnes of high-grade (+49%)
manganese ore per year. Gulf’s DSO will be in high demand due to its high
manganese content and low impurities and very high manganese to iron ratio
and as such should command a premium price over lower grade ores.
Final preparations are currently being made to commence initial ore supply from
Sumbawa, with first ore expected to be loaded in containers and transported to
Kupang for processing before the end of this quarter.
With regard to sourcing additional ore, some twenty two mines have responded
to the granting of our DSO export permit by completing their RKAB applications
to the NTT Ministry of Energy and Mineral Resources (ESDM) to recommence
mining operations. These mines were forced to close down under Indonesian
government’s beneficiation policy in 2013, which banned the export of
untreated ores. Gulf expects to see the productivity of these mines build
Page 18
incrementally over the coming months as production is gradually ramped-up,

along with the utilisation of key logistical and warehousing infrastructure.
Of these 22 applications, 13 have been approved by EDSM with a further nine in

process. Approved RKAB applications are now waiting for final approval from
the Provincial Government.
Following an initial shipment of about 100 tonnes to test the logistics route from
the mine to market, GMG expects monthly exports to commence at 1,000
tonnes per month and ramp up to 10,000 tonnes per month by Q1 2020. This
ramp-up in operations will be supported by supply of additional ore from the PIJ
mine which is anticipated to come online in September.
6. Kupang Smelting Hub Facility

Location and infrastructure
The Kupang Smelter is ideally located on Timor Island where the majority of the
Indonesian high grade manganese mineralisation occurs.
The Kupang Facility is also ideally located to supply key global markets with
direct access to international container lines and bulk cargo trade routes on its
door step.
Figure 6.1 – Kupang Project Location
GMC FeMn Smelter
Australia – Northern Territory
Source: Apple Maps. Eastern Indonesia including the East Nusa Tenggara Province
The largest industry in the NTT Province is cement manufacture and associated
limestone mining, including illegal mining.
Page 19
Figure 6.2 – Kupang Site Regional Plan
Manganese
Mines
Kupang City Airport
Tenau Bulk and

Container Ports
Kupang Smelter
PLN Power Plants
Figure 6.3– Kupang Site Layout
Kupang City, Ports and Airport
Kupang Smelting Hub Facility
120 MW Boat Power Plant
32 MW Power Plant 30 MW Power Plant
40 MW Gas Power Plant

(construction site)
Source: Terra Studio
Page 20
Figure 6.4– Tenau Port (4km north-east of the Kupang Smelter)
Source: GMC
Development Timeline
The Kupang Smelter development timeline is summarised as follows:
• July 2017: smelter refurbishment commences in South Africa

• August 2017: dismantling of smelter equipment
• January 2018: furnace equipment containerized in South Africa and concrete slabs
poured in Indonesia
• April 2018: concrete foundations completed
• May 2018: smelters transported by road to Durban for shipping to Kupang
• Aug 2018: smelters arrival at Tenau Port, Kupang and start of smelter reassembly
• Sep 2018: new Governor of NTT Province calling a moratorium on all mining activities
• Oct 2018: A$10.8 cornerstone investment not proceeding due to uncertainty created
by moratorium on mining activities. Construction halted.
• May 2019: Gulf secured its DSO licence to export up to 103,162 tonnes of high-grade
manganese ore per year
At this time, and based on purchase orders made and the level of engineering
work undertaken by XRAM (the EPCM contractor) the project is 60% complete.
Subject to financing, the smelter construction with the first two furnaces can be
completed in about eight months.
Land Lease
The Kupang Smelting Hub site is situated on the Bolok Industrial Estate, directly
adjacent to the government-owned power station. Gulf has successfully
finalised rental terms for the Bolok land lease covering the initial 10 hectares
out of 35-hectare project site, and as part of the agreement, Gulf paid five years’
rent in advance to the Government of East Nusa Tenggara Province.
Power Supply
The Indonesian state-owned electricity company PT Perusahaan Listrik Negara
(PLN) owns and operated a power plant complex which shares a boundary with
the Kupang Smelter site. The power plant complex is made of:
• A 32 MW coal-fired power plant

• A floating diesel power plant contracted to supply 60 MW, but has a capacity of
120MW
• A recently commissioned 30 MW coal fired power plant
Page 21
Hence the total power available currently in the West Timor power network is
182 MW however only 152 MW is utilised. The current peak load for West Timor
is 70 MW, so there is a spare 82 MW available. With an annual consumption
growth of 10% and further expansion plans (40 MW gas-fired power plant) by
PLN on West Timor, there are no power issues for the Kupang Smelter in the
foreseeable future.
In April 2018, Gulf executed a five-year contract with PLN which guarantees the
provision of up to 20 MVA power supply, with an energy cost of 8.6 ¢/kWh. As
a premium customer, Gulf is guaranteed power supply in a load shedding event,
which is critical to maintaining consistent operations during periods of power
reduction.
Environmental and Building Approvals

in January 2018, Gulf receiving the Environmental License approval from the
Environmental Department of the Provincial Government Kupang, for the
development of the Kupang Smelting Hub Facility. The IMB Licence (Building
Permit) was also granted at that time.
Permitting
In August 2018, PT Gulf received its Operating Licence for the Kupang Smelting
Hub Facility. The Operations Permit is valid for 30 years for the buying, selling
and transporting of manganese ore within Indonesia for smelting, and to
conduct overseas sales of ferromanganese alloy in accordance with the
provisions of the laws and regulations in Indonesia.
In May 2019, GMC received final ratification and formal receipt of its Direct
Shipping Ore Licence (DSO) from the Ministry of Trade, this follows the related
approval for the DSO from the Ministry of Energy and Mineral Resources a week
earlier.
Kupang Smelter Raw Materials

As well as manganese ore, the Kupang smelter requires the following raw
materials, based on the first two furnaces:
Kupang Raw Materials Requirements

Raw Material tpa
Manganese Ore 112,000
FeSi 75% 14,071
Burnt Lime 29,422
Electrode Paste 949
Source: GMC
Construction
Positive discussions continue with several potential offtake partners and debt
providers to secure the requisite capital to fully fund the completion of the
Kupang Smelting Hub Facility construction program. Following recent
discussions, it is anticipated that construction activity will recommence once the
Page 22
appropriate funding has been secured, with commissioning of the first two
smelters remaining on target for June quarter 2020.
Processing
Thanks to a high manganese content and a very high Mn:Fe ratio, the smelting
process can be simplified using ferro-silicon as a reductant, rather than coke.
The use of coke results in an intermediate manganese alloy containing high
carbon, which has to be removed using an additional converter step.
Gulf’s siliciothermic process is summarised in Figures 6.5 and 6.6.
The siliciothermic process is used occasionally by other smelters, subject to the

availability of adequate manganese ore.
The siliciothermic process is Figure 6.5 – Comparison between Siliciothermic and Traditional Smelting Processes
commonly known but its use is
restricted by the availability of
adequate manganese ore
Source: GMC
Page 23
Figure 6.6 – Kupang Process Flow Chart
Source: GMC
Page 24
The raw materials (manganese ore, ferro-silica, and burnt lime) are loaded into
the 2 x 3 feed bins using the skip host. From the feed bins, the raw materials are
weighted and fed into the furnaces or to the ladles (ferro-silica) using a
conveyor. The burnt lime is used to lower the overall melting point and to
fluidise the slag so it goes to surface more easily.
Furnaces can be topped up as required. Electrode paste is continuously fed to

re-generate the 15m long electrodes. The temperatures reached in the furnace
are 1,800 to 2,200°C. A pour is scheduled every two hours. Melted metal is
poured into ladles containing ferro-silica. Slag is removed by slight tipping and
ladles are poured into each other to assist the chemical reactions while
temperatures remained above 1,490°C. Within half an hour, the
ferromanganese alloy is cast into the casting bays. The ferromanganese alloy is
left to cool at ambient temperature, while the slag is cooled with water.
Once cooled, the ferromanganese alloy, which is brittle, can easily be packaged
in bulk bags and containers for export. Ferromanganese is a lumpy material with
a silvery metallic surface.
Process Plant Products

Product Tonnes Analysis
MC FeMn Alloy 41,265 t
Mn 86.7%
Fe 10.9%
Si 1.9%
C 0.29%
P 0.22%
S 0.02%
Slag 80,755 t
MnO 27.7%
Al2O3 2.2%
SiO2 32.1%
CaO 35.1%
MgO 1.0%
Source: GMC
Capital Costs
The cost to complete the first two smelter units including refurbishment and
installation as well as the working capital to ramp up the operation has been
estimated at US$15 million.
We assumed that the additional two smelter units can be purchased and
installed for a capital cost of US$20 million over financial year 2022 (FY2022).
Our financial model considered an additional two furnaces for a capital cost of
US$22 million over FY2024.
Preproduction Capital Cost Estimates

Item Amount
First two smelter units (currently being installed) US$15m
Additional two smelter units FY 2022 US$20m
Additional two smelter units FY 2024 US$22m
Sustaining Capital US$0.5m/year
Page 25
Operating Costs
See Financial Assumptions section further below.
Commissioning
Gulf has appointed Steven Pragnell (see section 7) as President Director,
Commissioning and Technical Director to work closely with XRAM Technologies
(the EPCM contractor) to ensure successful delivery of the plant. XRAM
Technologies will assist the transition into operations by providing
commissioning engineers.
Production
At full production, the first two furnaces will process some 112,000 tonnes of
manganese ore per annum, to produce about 43,000 tonnes of premium quality
85%+ ferromanganese alloy.
Port Access
Arrangements have been confirmed so that Gulf can utilise high quality port
infrastructure located at the Port of Tenau Kupang for both bulk and container
loading.
Financial Assumptions
In its February 2019 corporate presentation, GMC provided a number of physical
and financial parameters summarised in the table below. Revenues and costs
are basically proportional to the smelter throughput.
Assumptions and Key Financial Parameters

Kupang Smelter Hub Facility
Furnaces (+ additional) 2x7 +2x9 +2 x 9 +2x9
Total Installed Capacity 14 32 50 68
Mn Ore Purchased 112,000 tpa 247,000 tpa 385,000 tpa 524,000 tpa
FeMn Alloy Sold 43,000 tpa 95,000 tpa 148,000 tpa 201,000 tpa
US$m US$m US$m US$m US$/t %
Manganese Ore 19.3 42.5 66.2 90.1 448 33%
FeSi 75% 17.6 38.9 60.6 82.3 409 30%
Burnt Lime 2.1 4.6 7.2 9.8 49 4%
Electrode Paste 0.6 1.3 2.1 2.8 14 1%
Power 7.0 15.5 24.1 32.7 163 12%
Salaries/Wages 1.7 3.8 5.9 7.9 39 3%
Laboratory 0.4 0.9 1.4 1.9 9 1%
Smelter Consumables 2.0 4.4 6.9 9.3 46 3%
Logistics 0.7 1.5 2.4 3.3 16 1%
Maintenance 1.0 2.2 3.4 4.7 23 2%
Fuels/Oils 0.1 0.2 0.3 0.5 2 0%
Environmental 0.1 0.2 0.3 0.5 2 0%
Smelting (excluding Mn Ore Purchase) 33.3 73.5 114.6 155.7 775 57%
General & Administration 2.1 4.6 7.2 9.8 49 4%
Sales & Marketing 3 6.6 10.3 14 70 5%
Overheads 0.4 0.9 1.4 1.9 9 1%
Total Overheads 5.5 12.1 18.9 25.7 128 9%
Total Operating Costs 58.1 128.1 199.7 271.5 1,351 100%
Revenue 81.7 180.5 281.2 381.9 1,900
Net Operating Margin 23.6 52.4 81.5 110.4 549
Source: GMC Scoping Study ASX announcement 11 Apr 2019. Note those financial parameters do not include DSO revenues and costs.
Page 26
Ferromanganese exports are subject to a 2.5% income tax. There is also a 2.5%
royalty to GMC’s partner JTS Group for alloy sales from the first two smelters.
The corporate tax rate is Indonesia is 25%.
Financial Modelling
The table summarises the results of the financial model. Financial years from
2025 to FY2027 are identical in terms of revenues and costs to FY2024. Financial
years beyond FY2028 are identical in terms of revenues and costs.
The project funding is assumed through a US$35m debt facility with equal
repayments over three years to FY2023, with an interest rate of 18%. Sustaining
capital is assumed to amount to US$0.5m per annum. No earned interest
assumed over the increasing cash balance.
Manganese ore sales have been assumed to terminate in FY2024.
Financial Model Summary

PHYSICAL FY2020 FY2021 FY2022 FY2023 FY2024[ […] FY2028
Smelter Units 2 2 2 4 4 6
Total Installed Capacity 14 MVA 14 MVA 14 MVA 32 MVA 32 MVA 50 MVA
Mn Ore Purchased 50,000 t 215,162 t 215,162 t 350,162 t 247,000 t 385,000 t
Mn Old Sold (DSO) @ US$250/t 35,000 t 103,162 t 103,162 t 103,162 t - -
Smelter Feed 10,000 t 112,000 t 112,000 t 247,000 t 247,000 t 385,000 t
FeMn Alloy Sold @ US$1,900/t 3,846 t 43,000 t 43,000 t 95,000 t 95,000 t 148,000 t
FINANCIAL SUMMARY US$m US$m US$m US$m US$m US$m
Net Revenue after royalties and tax 15.7 103.4 103.4 199.5 173.7 271.8
Operating Costs (12.1) (75.9) (75.9) (146.2) (128.5) (200.2)
Operating Margin 3.6 27.5 27.5 53.3 45.3 71.7
Net Cash Flow (2.5) 6.9 2.9 38.9 33.6 53.4
Cash at Bank 35.5 65.4 79.4 118.2 151.8 289.4
Capital Cost (3.0) (13.0) (20.5) (0.5) (0.5) (0.5)
NPV @10% GMC 74.9% interest A$293.9 A$326.1 A$351.1 A$383.0 A$378.4 A$400.6m
Net cash flows have been discounted with a discount rate of 10% and a A$/US$
exchange rate of 0.68 has been assumed to derive the NPVs.
7. Directors & Management Team

Craig Munro, Non-Executive Chairman
Craig is a qualified accountant and was previously a Fellow Certified Practising
Accountant, Fellow of the Australian Institute of Mining and Metallurgy and a
Fellow of the Institute of Company Directors. He has over 35 years’ experience
with ASX, AIM and TSX listed companies as Chairman, Finance Director and
General Manager, and in positions relating to corporate governance, financial
reporting and equity raisings.
Craig started his career in the iron ore industry and has added a number of
success stories to his CV including Aquarius Platinum and Anvil Copper.
Hamish Bohannan, Managing Director & CEO

Hamish holds an Honours Degree in Mining Engineering from the Royal School
of Mines UK and a MBA from Deakin University. He has extensive corporate and
Page 27
operational experience in public companies within Australia and overseas in the

capacity of Managing Director or CEO.
Hamish has built a career developing exciting projects around the world and has
a reputation for high standards in community liaison, environmental excellence
and developing a safety culture.
Andrew Wilson, Non-Executive Director

Andrew, a Bachelor of Commerce (Marketing) and a Master of Laws, has over
The Directors have strong 30 years’ of legal experience, including 16 years with BHP where he was
backgrounds in mineral
exploration, project
President Director PT BHP Billiton Indonesia from 2000 until 2007.
development, finance and
accounting, with considerable Andrew has been a director of various public companies, including: Herald
Indonesian experience. Resources Ltd, Robust Resources Ltd, PT Resource Alam Indonesia TBK, and
director or chairman of various not for profits. He is a Fellow of both the
Australian Institute of Company Directors and the Australasian Institute of
Mining and Metallurgy, and a member of the Risk Management Institution of
Australasia..
Tan Hwa Poh, Non-Executive Director

Mr Tan Hwa Poh works as a private business consultant, essentially bridging
businesses between Singapore, Indonesia, Thailand and Hong Kong. His
strengths lie in liaising with the respective country’s government departments
and embassies, helping to reduce the effect of “red tape” and bringing together
the business and government sectors to create efficient and lasting
partnerships. Concurrently, Mr Tan Hwa Poh is the Business Development agent
for his family’s group of hotels located across the Asia Pacific region. In addition
to his business development activities in Asia, he is passionate about developing
meaningful jobs and improving conditions for those less fortunate. As such, he
is fully committed to the construction of temples, hospitals and 911 highway
rescue teams across Thailand.
Robert Ierace, CFO

Robert is a Bachelor of Commerce and Chartered Accountant and Secretary with
over 20 years’ experience, predominantly with ASX and AIM listed resources, oil
and gas exploration and production companies. He has extensive experience in
financial and commercial management including experience in corporate
governance, debt and capital raising, risk management, treasury management,
insurance and corporate acquisitions and divestment. Robert has previously
served in senior financial roles for various resource and oil and gas companies,
including Bullseye Mining Limited, Key Petroleum Limited, Amadeus Energy
Limited, Kimberley Diamond Company NL and Rio Tinto Iron Ore.
Ian Gregory, Company Secretary

Ian previously acted as Gulf’s Company Secretary between 2 July 2018 until 20
November 2018 and is a professionally well-connected Director and Company
Secretary with over 30 years’ experience in the provision of company secretarial
and business administration services. Ian holds a Bachelor of Business degree
from Curtin University and is a Fellow of the Governance Institute of Australia,
the Financial Services Institute of Australia and a Member of the Australian
Institute of Company Directors. Ian currently consults on company secretarial
Page 28
and governance matters to several listed and unlisted companies and is a past
Chairman of the Western Australian Branch Council of Governance Institute of
Australia.
Peter Allen, General Manager Marketing

Peter is an experienced Marketing Executive with over 20 years’ sales and
marketing experience in the commodity export, sales and bulk logistics
industries. He has held senior executive positions, including General Manager,
Director and Managing Director of Marketing roles with various companies,
The experience and track including Consolidated Minerals. Peter has developed a significant network
record of Steven Pragnell is
quite impressive. within Asia in the steel raw material sector.
Steven Pragnell, President Director / Commissioning Director

Steve spent 6 years in the Royal Australian Air Force and is a commercial
helicopter pilot. He has over 30 years’ experience in various positions in
operations, maintenance and senior management within the mining and
smelting sectors. Steve has vast experience in smelter design and commissioning
as summarised in the table below.
Dates Name Location Facility / Work Operator Role

1983-1989 Wellesley/ Western Commission and operate SIMCOA (Silicon Metal Commissioning,
2007-2008 Bunbury Australia 2x 18.5 MW silicon furnaces and Company of Australia) operation and
2x charcoal retorts supervision
1983 Kwinana Western Commissioning of HIsmelt Corporation Commissioning Engineer

Australia Smelt Reduction Vessel (SRV) & and Team Manager
Cokeless Cupola
1984-1998 George Town Tasmania Refurbish and commission of Tasmanian Electro Team Manager and
Furnace 3 and Sinter strand Metallurgical Co Production Coordinator
(TEMCO) (ex-BHP, now
South 32)
1998-2005 Jubail Saudi Arabia Refurbish, commission, operate Gulf Ferro Alloys Production Manager
and optimize a failed Corporation (Sabayek)
commissioning of 2x 20 MW
silicon furnaces and 2x 20 MW
FeSiMn furnaces
2005-2006 Jubail Saudi Arabia Convert complete raw materials Gulf Ferro Alloys Consultant
feed system to convert Corporation (Sabayek)
2x 20 MW silicon furnaces to
2x 20 MW FeSiMn furnaces
2006 Karaganda Kazakhstan Design and build 2x 18.5 MW Silicium Kazakstan Managing Director
silicon furnaces
2006 Perth Western Feasibility study for chrome Consolidated Minerals Consultant
Australia furnace
2007-2009 New Haven West Virginia Refurbish and restart Felman Production Chief Executive Officer
1x 40 MW FeSiMn furnace Company
2009-2011 New York USA Business strategy for mine Globe Specialty Metals Acquisitions and Vice
development and furnace President Business
troubleshooting Development
2015-2017 Helguvik Iceland Design, build and commission United Silicon HF Chief Operating Officer
1x 36 MW silicon furnace
Page 29
Dates Name Location Facility / Work Operator Role

2018 Bakki Iceland Commission PCC Bakki Silicon HF Consultant
2x 24 MW silicon furnaces
Since 2018 Kupang West Timor Construct, commission and PT Gulf Mangan Grup President Director and
operate 2x 7 MVA FeMn (subsidiary of Gulf Technical Director
furnaces Manganese Corp.)
Source: Steven Pragnell
8. Investment Risks
GMC is exposed to a number of risks including:
• Geological risk: the actual characteristics of an ore deposit may

differ significantly from initial interpretations.
• Resource risk: all resource estimates are expressions of
judgment based on knowledge, experience and industry
practice. Estimates, which were valid when originally
calculated may alter significantly when new information or
techniques become available. In addition, by their very nature,
resource estimates are imprecise and depend to some extent
on interpretations, which may prove to be inaccurate.
• Feasibility risk: once mineral deposits are discovered, it take a
number of years from the initial phases of drilling until
production is possible, during which the economic feasibility of
production may change. Substantial time and expenditures are
required to:
o establish mineral reserves through drilling;
o determine appropriate mining and metallurgical processes for
optimizing the recovery of metal contained in ore;
o obtain environmental and other licenses;
o construct mining, processing facilities and infrastructure required for
greenfield properties; and
o obtain the ore or extract the minerals from the ore.
• Commodity price risk: the revenues GMC will derive through
the sale of manganese ore and ferro manganese alloys expose
the potential income to manganese and ferro manganese price
risks. Those price prices fluctuate and are affected by many
factors beyond the control of GMC. Such factors include supply
and demand fluctuations, technological advancements and
macro-economic factors.
• Exchange Rate risk: The revenue GMC derives from the sale of
manganese products exposes the potential income to
exchange rate risk. International prices of various commodities
are denominated in United States dollars, whereas the costs
base is in Indonesian Rupiah (IDR) and USD and the financial
reporting currency of GMC is the Australian dollar, exposing the
company to the fluctuations and volatility of the rate of
exchange between the IDR, USD and AUD as determined by
international markets.
• Mining risk: A reduction in mine production would result in
reduced revenue.
Page 30
• Processing risks: A reduction in plant throughput would result

in reduced revenue. In all processing plants, some metal is lost
rather than reporting to the valuable product. If the recovery
of metal is less than forecast, then revenue will be reduced.
• Operational cost risk: an increase in operating costs will reduce
the profitability and free cash generation of the project.
• Management and labour risk: an experienced and skilled
management team is essential to the successful development
and operation of mining and smelting projects.
Analyst Contact
J-François Bertincourt Peter Sheppeard
Director Managing Director
Terra Studio Pty Ltd Triple C Consulting Pty Ltd, Perth
Sydney, NSW 2000 Perth, WA 6000
Tel +61 406 998 779 Tel: +61 8 9228 5999
www.terrastudio.biz www.tripleccc.com.au
This Research Report was prepared by Terra Studio Pty Ltd and is No part of the analyst's compensation was, is or will be directly or
provided by Triple C Consulting Pty Ltd ABN: 45 141 412 106, Australian indirectly related to any view or recommendation expressed in this
Financial Services Licence No. 346282 (“Triple C Consulting”). Terra Report.
Studio Pty Ltd is a Corporate Authorised Representative No. 471800 of
Neither the analyst nor any member of the analyst’s immediate family
Triple C Consulting.
has an economic interest in the securities covered in this Report or
DISCLAIMER other securities which may influence this Report.
Triple C Consulting believe that the advice and information in this DISCLOSURE OF INTEREST
Report is accurate and reliable. However, no warranties of accuracy,
Triple C Consulting is engaged by the Company to provide corporate
reliability or completeness are given in relation to the advice or
advisory services, for which it is paid $10,000 plus GST, per month.
information (except insofar as liability under any statute cannot be
Triple C Consulting is entitled to receive a placement fee of 5 per cent
excluded). No responsibility for any loss or damage whatsoever arising,
plus GST and management fee of 1 per cent plus GST, on any amounts
from any errors, or omissions or any negligence is accepted by Triple C
raised by Triple C Consulting via any placement of the Company’s
Consulting or any officers, employees or agents.
securities. Triple C Consulting has received remuneration paid by the
Triple C Consulting initiated the research of the Company and the Company of $513,481.88, GST included, in the last 24 months.
writing of the Report, of its own volition. The Report was not
At the date of publication the directors and employees of Triple C
commissioned by the Company. However, the Company provided
Consulting and their associates have an interest of 62,304,834 shares
assistance by verifying the factual information contained in the Report.
in the Company.
No inducements have been offered or accepted Triple C Consulting for
the publication of this Report. Triple C Consulting advises that it, its directors and employees earn
brokerage and other benefits or advantages, either directly or
RESEARCH ANALYST indirectly from client transactions in securities the subject of this
This Research Report reflects the views of the research analyst, Report.
Jean-François Bertincourt, who visited the Company’s material
operations in West Timor.
WARNING
To the extent that the content of this research report contains advice,
The Report is based on current information supplied by the Company
it is general financial product advice. In preparing this report, the
as well as information generally available in the market. Whilst all
investment objectives, financial situation and particular needs
reasonable efforts have been made to obtain information from reliable
(‘financial circumstances’) of any particular person have not been
sources and to verify the information, some of it cannot necessarily be
taken into account. Accordingly, before acting on any advice contained
verified.
in this report, you should assess, with or without the assistance of a
The opinions and recommendations in the Report are based on professional adviser, whether the advice in this Report is appropriate
reasonable grounds following the assessment of the information by the in light of your own financial circumstances.
analyst. The analyst is well-qualified and has used due care and skill in
No part of this report may be reproduced or distributed in any manner
assessing the available information.
without permission of Triple C Consulting.
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EQUITY RESEARCH 20th August 2019

GULF MANGANESE CORP. LTD (ASX: GMC) Speculative BUY

Key Assumptions include LC FeMn price flat at US$1,900/t, 49%

Valuation: Considering the significant added value generated by the

GMC holds a 74.9% interest in Indonesian subsidiary PT Gulf Mangan Grup. PT

GMC cash balance was at $3.983 million as at 30 June 2019.

GMC Capital Structure

Securities Number Price Expiry Notes

Source: GMC Appendix 3B 30 July 2019

The Base Case generates a healthy NPV and rate of return.

The smelter valuation sensitivity to operating costs and ferromanganese prices

Kupang Smelter post-tax IRR sensitivity, A$, 74.9% basis

Further sensitivity analysis is summarised in the Figure 1.1.

The strongest sensitivity relates to ferromanganese prices as expected.

Figure 1.1 – Kupang Smelter, post-tax un-risked NPV sensitivity

GMC valuation is most sensitive $400

Variation from Base Case

Subject to successful construction and commissioning of the smelter in parallel

GMC Valuation (12 to 18 month horizon)

2. GMC Corporate Overview

Gulf is focused on developing a ferromanganese smelting business in West

Whilst Indonesia is home to many high-grade manganese deposits the

GMC Share Register

Figure 2.1 – Gulf Organisational Chart

As operations at the Kupang Smelting Hub Facility and associated mines

3. Indonesia Country Overview

The DSO Licence obtained by GMC is within this regulatory framework.

• Mining Area (referred to in Bahasa Indonesia as Wilayah Pertambangan – “WP”)

Major producers of manganese ore include South Africa, Australia, Gabon,

About 90% of all manganese consumed is used in the production of steel,

Steels usually contain from 0.2% to 2% manganese in the form of manganese

Medium and low carbon ferromanganese are commonly referred together as

Figure 4.1 – Manganese Value Chain

Miners Manganese Ore

In 2018, IMnI indicates the following market components of the manganese

• Silico-manganese (SiMn) 15.959 million tonnes produced, used mainly in lower-grade

Figure 4.2 –Manganese Alloys Market in 2018

Other Manganese Uses

Figure 4.3 – Global Manganese Ore Production

As a result of this legislation being implemented in 2012, mining of manganese

Manganese Ore Typical Specifications

Figure 4.4 –Manganese Ore Competitor Analysis

Total Impurities of Fe, Al2O3 and P (%)

Lower Quality Better Quality

It is Gulf’s intention to enable many of Indonesia’s high-grade manganese mines

Fast Markets / Metal Bulletin

For example a manganese ore containing 49% Mn will be priced at:

!"$5.91 ) 49% = !"$290/012

Jupiter Mines Limited

Historical Prices and Forecast

Figure 4.5 – Manganese Value Chain

LC FeMn EXW USA

1. Mn nodules in deep-sea (pelagic) sediments,

Exploration for Mn mineralisation within the Indonesian Archipelago is

In 2015. SRK estimated the total tonnage of prospective Mn stratigraphy

Total Tonnage of Prospective Mn Stratigraphy, West Timor

Parameter Mine/Production Exploration Total

Historical mining practices used minimal earthmoving equipment and

Manganese Ore Sources

• Gulf owned IUP, managed and operated by GMC subsidiary,

Manganese Ore Feed Requirements

GMC requires an ore-feed with emphasis on the ratios of certain chemical

These mines were forced to close down under Indonesian government’s